The first quarter earnings season has gotten underway, though it will take a few more weeks for the reporting cycle to get into high gear. The initial reports from the likes of Oracle (ORCL) and FedEx (FDX) have been disappointing, but it’s perhaps premature to extrapolate that to the rest of the reporting season. We have 43 companies reporting quarterly results this week, including 8 S&P 500 members.

As has been the case at the start of recent quarterly earnings cycles, expectations for the first quarter earnings season remain quite low. Total earnings for companies in the S&P 500 are expected to be down 2.8% from the same period last year. This would compare to actual earnings growth of 2% in the fourth quarter.

Tough comparisons account for the bulk of the weak growth outlook for the first quarter – the first quarter of 2012 still remains the highest point for quarterly earnings since the start of this earnings cycle in 2009.

Compared to the preceding quarter, the key variance is in the expectations for the Finance and Tech sectors. Total Finance sector earnings are expected to drop 3.2%, after the 10.3% gain the quarter before and many quarters of double-digit earnings growth.

The primary reason for Finance’s weakness in Q1 is the unfavorable comparison – the first quarter of 2012 was the strongest quarter for the sector since 2009. In absolute dollar terms, the Finance sector’s profitability level in the first quarter of 2013 is the second best after the first quarter of 2012. The unfavorable comparison aspect is particularly pronounced for AIG (AIG) and Bank of America (BAC). Excluding these two companies, total Finance sector earnings would be down 0.4% in the quarter.

Investors don’t seem to be overly concerned about lack of earnings growth in the first quarter as they are looking ahead to the resumption of growth later this year. The consensus view is that earnings growth in the first half of 2013 will be roughly equivalent to the growth pace in the second half of 2012 – of about 1%. But they are looking for double-digit earnings growth in the back half of 2013 and full-year 2014. And as long as that outlook remains intact, they will remain content with a weak growth pace in the first quarter.

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